Application for third party disclosure can be served abroad where the documents are within the jurisdiction

The Court of Appeal has upheld an order permitting an application for third party disclosure to be served on a respondent outside England and Wales, in circumstances where the documents sought were located in England: Gorbachev v Guriev [2022] EWCA Civ 1270.

The decision shows that the courts may permit an application for third party disclosure to be served on a respondent abroad, at least where the documents are within the jurisdiction. This is contrary to a previous High Court decision which held that none of the jurisdiction "gateways" applied to an application for third party disclosure, though in that case the documents as well as the respondent to the application were abroad.

The present decision highlights that the well-established presumption against extra-territoriality in interpreting legislation may have less force where the matter the court is concerned with may be seen as within the jurisdiction, even if the persons against whom an order would be made are abroad.

The decision leaves open the question of whether the court has jurisdiction to make a third party disclosure order against a respondent abroad, and thus to permit service of the application out of the jurisdiction, where the documents are also held abroad. This question was best left to be resolved in a case where it would make a difference - though the court noted that such a case is likely to be rare, as it would rarely be appropriate to exercise the jurisdiction to make an order against documents abroad (if such jurisdiction exists) due to the risk of trespassing on the letter of request procedure.

It is worth noting that the jurisdictional gateways have been expanded significantly from the beginning of October, including to allow certain applications for disclosure against non-parties to be served out of the jurisdiction. However, the new gateway for "information orders against non-parties" does not apply to an ordinary application for third party disclosure. It is limited to an application for disclosure to obtain information regarding the true identity of a defendant (or potential defendant) and/or what has become of the property of a claimant or applicant - ie, essentially, applications for Norwich Pharmacal and Bankers Trust orders.

Background

The underlying dispute relates to the parties' respective interests in a fertiliser business based in Russia. A relevant issue in that dispute is the financial support given by two Cyprus Trusts. At the relevant time, the Trustees were advised by a partner at Lawrence Graham LLP who has since joined Forsters. Accordingly, Forsters has possession of documents which, on the claimant's case, are likely to be relevant.

The claimant brought an application against Forsters for disclosure of the documents, which Forsters resisted on the basis that the application should properly be made against the Trustees. The claimant therefore joined the Trustees to the application and sought permission to serve the application on them out of the jurisdiction.

Permission was granted on the basis that the application for third party disclosure fell within gateway (20) in Practice Direction 6B, namely a "claim" made "under an enactment which allows proceedings to be brought", which (as has been established by case law) means an enactment which allows proceedings to be brought against persons outside England and Wales. The "enactment" relied on was s.34(2) of the Senior Courts Act 1981 (SCA), which enables the court to make orders for third party disclosure.

Following service, the Trustees applied to set aside the order granting permission. The application was rejected by the High Court (Jacobs J). The Trustees appealed.

Decision

The Court of Appeal dismissed the appeal, Males LJ giving the lead judgment with which Davies and Lewis LJJ agreed. The key issue which arose on the appeal was whether the court had jurisdiction to make an order for disclosure of documents against a third party outside England and Wales. If there was jurisdiction, the question arose as to whether the judge had been wrong to exercise his discretion to grant permission to serve out.

The Trustees argued that there was no such jurisdiction because:

1. an application for third-party disclosure is not a "claim" and does not constitute "proceedings" for the purposes of gateway (20); and
2. applying the principle of territoriality, s.34 of the SCA does not allow proceedings to be brought against persons outside England and Wales.

Meaning of "claim" and "proceedings"

Males LJ referred to two High Court cases in which the parties sought permission to serve pre-action or third party disclosure applications abroad. In the first, ED&F Man v Obex Securities [2017] EWHC 2965, the court found that an application for pre-action disclosure fell within the concept of "claim" and proceedings" for the purposes of the equivalent gateway, despite the fact that it was begun by application notice rather than claim form. In the second, Nix v Emerdata Ltd [2022] EWHC 718 (Comm), the court reached the opposite view in respect of an application for third party disclosure, and doubted the conclusion reached in ED&F Man in respect of pre-action disclosure.

In the present case, Males LJ held (agreeing with Jacobs J at first instance) that an application for third party disclosure did amount to a "claim" / "proceedings" for these purposes, rejecting arguments that a "claim" had to be to enforce a substantive rather than procedural right and that "proceedings" were essentially freestanding. The term "claim" was not used in any restrictive or technical sense in PD 6B and included applications for pre-action or third party disclosure. Similarly, the term "proceedings" had to be given a neutral and common sense meaning, which included an application for third-party disclosure.

The principle of territoriality

The principle of territoriality, or presumption against extra-territoriality, is a firmly established principle of statutory interpretation which means that legislation is generally not intended to have extra-territorial effect.

Males LJ referred to the formulation of the principle in Bennion, Statutory Interpretation, endorsed by Lord Bingham in R (Al-Skeini) v SoS for Defence [2007] UKHL 26, that, "Unless the contrary intention appears … an enactment applies to all persons and matters within the territory to which it extends, but not to any other persons or matters".

Males LJ noted that this formulation leaves open the possibility that, although a person may be outside the jurisdiction, the relevant matter with which the court is concerned may properly be regarded as within the jurisdiction. In such a case, he said, any presumption against extra-territoriality has less force than would otherwise be the case.

The parties in this case, he noted, had adopted relatively extreme positions. The Trustees submitted that the English court never has jurisdiction to order the production of documents by a third party outside the jurisdiction, whereas the claimant submitted that it always has jurisdiction to do so, albeit that this jurisdiction will not ordinarily be exercised as a matter of discretion.

Males LJ said that, in a typical case where both the respondent to the application and the documents are abroad, the principle of territoriality no doubt has an important role in considering the scope of s.34, particularly as cases in various contexts have consistently held that apparently wide and general words enabling documents to be obtained should be interpreted subject to the principle of extraterritoriality. The existence of the letter of request procedure and the limitations to which it is subject would, he said, be circumvented if wide-ranging disclosure of documents held by third parties abroad could be too readily obtained by means of an application for third party disclosure.

However, the critical fact in the present case was that the relevant documents were located in England, even though the Trustees were outside the jurisdiction. The Trustees had sent the documents to Forsters in England so that they could obtain advice about various transactions, some of which occurred in England. So it was not a matter of chance that they were held within the jurisdiction. None of the cases to which the court had been referred in this case on the principle of territoriality (including Nix v Emerdata, where the court had concluded the principle of territoriality precluded an order for third party disclosure against a respondent abroad) concerned documents located within the jurisdiction.

In these circumstances, Males LJ said, the principle of territoriality had "little or no application". Requiring the production of documents located within the jurisdiction would not involve any illegitimate interference with the sovereignty of a foreign state. By sending the documents to England, the Trustees had made the documents subject to the jurisdiction of the English court and, to the extent necessary, could be regarded as having accepted the risk that they might be subject to production in that court.

Further, there was no question of circumventing the letter of request procedure, as it was not at all clear that documents located within the jurisdiction could be obtained by means of that procedure. The foreign court might well take the view that production of such documents was a matter for the English court.

Accordingly, the court held that s.34 of the SCA allows a third party disclosure application to be brought against a respondent abroad in respect of documents located within England and Wales. It was unnecessary to decide whether the court would have jurisdiction to make such an order in respect of documents located elsewhere, and it was preferable to leave that question to be decided in a case where it would make a difference. In any event, Males LJ noted, in light of the availability of the letter of request procedure, it would only be in an exceptional case that it would be appropriate to exercise such jurisdiction (if it existed).

Discretion

While the judge had recognised that there are powerful reasons why disclosure applications against overseas third parties should generally be made using the letter of request regime (as set out in Nix v Emerdata), he had considered that it was appropriate to grant permission in this case, including because the documents were here and they concerned transactions on which English solicitors had advised and some of which had taken place in England. There was no basis on which to fault the judge's exercise of discretion.

Note: The Supreme Court has refused permission to appeal.